Two steps forward, one step back: The contraction in Egypt’s non-oil private sector deepened in September as the impact of successive currency devaluations caused a sharp fall in output, according to S&P Global’s latest PMI figures (pdf) out yesterday. The index slipped to a four-month low of 48.7 from 49.2 in August as soaring inflation and shortages of raw materials caused an “unprecedented” rise in backlogs despite client demand continuing to fall.

A reversal: The depth of contraction had gradually eased over the previous five months, with the waning effects of January’s currency devaluation helping to stabilize the non-oil economy and pushing the PMI to its highest level in almost two years in June. Nonetheless, the reading has remained below the 50.0 threshold that separates growth from contraction for 34 months, taking us close to three years with zero growth.

High prices + supply problems = record backlogs: Businesses faced “unprecedented pressure on their operating capacity in September despite sales continuing to fall,” said David Owen, senior economist at S&P Global Market Intelligence. “Firms frequently reported that the high-inflationary environment and a lack of raw material supply meant they were often unable to fulfill client orders,” he added. This is the sharpest recorded increase in work backlogs since the PMI survey was launched in 2011.

But businesses are hiring: Firms recruited new staff at the fastest rate in more than five years in September, according to the PMI. This is the second month running companies have expanded headcount.

Looking into the crystal ball: September’s report described non-oil businesses as “mildly confident” of an increase in output over the next year. On the confidence front, the report pointed to a slip in confidence from August’s poll that reported only 9% of respondents sharing a positive outlook for the coming year, stating liquidity and price volatility concerns.

FROM THE REGION- Saudi PMI accelerates: The kingdom’s non-oil private sector grew at an accelerated rate last month with their headline PMI rising to 57.2 from 56.6 in August on stronger sales, according to the PMI (pdf). The UAE PMI is due out today at 7:15am CLT.

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